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Gartner: SCO's Legal Fees Could Jeopardize Its Software Business

"Mounting financial pressures have forced SCO to find
alternatives to pay Boies, Schiller & Flexner. SCO not only
faces the litigation against IBM (scheduled for April 2005) but
must also defend counterclaims by Red Hat and IBM. Moreover, after
threatening 1,500 Linux users for infringing its intellectual
property rights, SCO has declared that within 90 days (or by about
February 2004) it will start litigation against one or more Fortune
500 companies with large Linux installations.

"SCO has declared in filings with the U.S. Securities and
Exchange Commission that its competitive position could decline if
the company can't obtain additional financing. The latest share
issue will dilute shareholders' investments about 3.5 percent. It
comes on top of a previously announced arrangement giving Boies,
Schiller & Flexner a 20-percent share in SCO if the company
were sold. SCO also received an investment of $50 million from
BayStar Capital in return for 17.5 percent of outstanding shares.
We believe that these moves compromise SCO's mission as a software
company. Increasingly, the legal and financial aspects of the
intellectual property infringement cases will absorb the company's
attention, and a law firm will be in an increasingly powerful
position to set the overall agenda for its compensation. Therefore,
SCO will likely pursue claims against Linux users quickly. Its
degree of success will determine the vendor's financial
health..."